Intrepid Potash, Inc · NYSE:IPI
Intrepid Potash — Investor Presentation (June 2010)
49 slides from Intrepid Potash's investor presentation, Jun 8, 2010
Slide 1: Investor Presentation June 2010
Investor Presentation June 2010
Slide 2: Forward-Looking Information
Certain statements in this presentation, and other written or oral statements made by or on behalf of us, are “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management’s expect
Slide 3: Intrepid Potash Strategically Located, Potash-Only Company
3 Intrepid Potash Strategically Located, Potash-Only Company Intrepid has an intense margin focus: Improve reliability and efficiency Capital investment to increase recoveries and productivity which is designed to lower per ton production cost Innovate production methods Our production focus combine
Slide 4: Company Overview
4 Company Overview The largest U.S. producer of potassium fertilizer Only western world producer created and dedicated solely to potash-related products Supplies ~1.6% of global demand and ~9.4% of U.S. demand 1 of 2 global producers of sulfate of potash magnesia, marketed as Trio™ 5 active producti
Slide 5: Solid Financial Performance
5 Solid Financial Performance EBITDA(1) (In millions) Balance Sheet as of March 31, 2010 (1) This is a financial measurement not calculated based on U.S. Generally Accepted Accounting Principles (Non GAAP). Non-GAAP reconciliation available in the appendix to this presentation. Net Income (In millio
Slide 6: Supply and Demand Conditions Lead to the Current Pricing Environment
6 Supply and Demand Conditions Lead to the Current Pricing Environment Granular Muriate of Potash (MOP) Midwest Pricing Midwest Granular MOP ($/ton) Source: Green Markets, Fertecon, International Plant Nutrition Institute (IPNI). Example Prices ($ / ton) U.S. Midwest (fob warehouse) $400 spot Saskat
Slide 7: United States Potash Consumption
7 United States Potash Consumption Source : Fertecon, United States Department of Agriculture (USDA). Potash consumption is shown in fertilizer years (July – June). Potash fertilizer consumption has remained relatively constant, with an annual volatility of approximately ten percent, over the past 2
Slide 8: Farmers Understand the Agronomic Benefits of Potash
Farmers Understand the Agronomic Benefits of Potash Potash application rates were down in 2008 and 2009 2009 presented good growing conditions for farmers A robust 2009 crop coupled with lower application rates means soils were being depleted of “banked” nutrients Over 80% of respondents said that p
Slide 9: Q1 2010 Was Strong For Intrepid
Q1 2010 Was Strong For Intrepid Aggregate sales of potash in the first quarter of 2010 were 243,000 tons and reflected a more typical agricultural cycle spring fill and application season Red Granular product inventory and production was fully committed through mid-May 2010 The Intrepid list price i
Slide 10: North American Production Tracks Market Demand
10 North American Production Tracks Market Demand 000s Tons in KCL Equivalent (1) Sales include both domestic and export sales Source: IPNI Sales (1) Production - 500 1,000 1,500 2,000 2,500 3,000
Slide 11: Potash Market Trends
11 Potash Market Trends Worldwide recession Global buyer / dealer hesitation Producer inventories building Elective production curtailments / mine shutdowns Relatively full supply chain at the dealer and retail level Dealers unwilling to take price risk Slower sales into agricultural & industrial ma
Slide 12: Q2 2010 to Date
Q2 2010 to Date Spring buying in the agricultural market is essentially complete, following a normal demand pattern June & July historically slower period in agricultural sales cycle Dealers are purchasing when they have specific demand requirements from farmers Sales into the industrial market, pri
Slide 13: Strong Returns for Corn Growers
13 Strong Returns for Corn Growers - Non-land fixed costs include: labor, opportunity cost of unpaid labor, taxes, insurance, general overhead, and machine and equipment expenses. - Other variable costs include: seed, chemicals, fuel, lube, electricity, repairs, water, interest, custom operations, a
Slide 14: Population growth continues despite financial crisis
14 In spite of financial crisis, population growth continues Assuming a 1.1% growth rate in world population: Each year – 75 million more people or approximately nine more New York Cities This would require an additional 40 million acres of arable land (1.2x the farmland in Iowa)(1) A world yield in
Slide 15: Increasing Population Continues to Drive Grain Demand
15 Fundamentals of Increasing Population Continue to Drive Grain Demand Over the Long-Term Note: Grains include corn, wheat, barley, oats and sorghum. Stock to use ratio is average inventory / consumption for that year; data updated monthly. Source: United Nations Food and Agriculture Organization (
Slide 16: U.S. Corn Production Utilized for Ethanol
U.S. Corn Production Utilized for Ethanol 16 Source: USDA, Food and Agricultural Policy Research Institute (FAPRI). U.S. Corn (Million Bushels) Percent of U.S. Corn Production Utilized for Ethanol 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 0 2,000 4,000 6,000 8,000 10,000 12,000 14
Slide 17: Why Consider an Investment in Intrepid Potash
17 Why Consider an Investment in Intrepid Potash Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities that Lower Per-Ton-Costs
Slide 18: Strategically Located Assets
18 Average Potash Consumption Approximately 5x Greater than Our Average Production in Our Markets Low High Source: Association of American Plant Food Control Officials (AAPFCO), The Fertilizer Institute (TFI), Intrepid Potash. (1) AAPFCO, Fertecon, USDA. New Mexico Texas Oklahoma Kansas Colorado Mis
Slide 19: Intrepid vs. North American Competitors
19 (2) Source: Green Markets and Fertecon Notes: (1) Based on Full Year 2009 for Intrepid Potash Inc., Potash Corp., Mosaic Co., Agrium Inc. (2) Total COGS include: Cash operating costs including all royalty, profit and capital taxes; Royalties of $20 per ton for Intrepid; Royalty, profit and capita
Slide 20: Diversified Markets and Customer Base
20 We sell potash into three different markets: Agricultural, Industrial and Feed Agricultural represents ~70% of Intrepid sales compared to an industry average of 92%(1) Agricultural primarily consumes granular potash and Trio™, industrial primarily consumes standard potash Standard potash costs le
Slide 21: Debottlenecking and Expansion Projects
21 Facility Estimated Key Benefits Estimated Capex Range for Future Projects (1) Estimated in service date Potash Debottlenecking and Expansion Projects at Existing Facilities Storage and Hoisting Capacity Upgrade West H2 2009 Decouple underground and surface operations Improve potash recoveries at
Slide 22: Langbeinite Recovery Improvement Project
Langbeinite Recovery Improvement Project Increases langbeinite recoveries from 35 percent to 50 percent thereby reducing cash costs per ton Reduces process water consumption Allows for production flexibility through the ability to granulate 100 percent of standard production Utilizes existing produc
Slide 23: Sales of Potash & Trio in the United States
24 Sales of Potash & Trio™ in the United States Intrepid Sells Potash & Trio™ into Multiple Markets & Multiple End Users
Slide 24: Current Trio Market and Growth Potential
The current market for Trio™ consists mainly of granular sales, with significant growth possible in the granular market Intrepid is investing in education and marketing programs intended to increase awareness of the benefits of magnesium and sulfur The majority of the growth should be in the interna
Slide 25: Langbeinite Recovery Improvement Project Timeline
Langbeinite Recovery Improvement Project Timeline 26 January – April 2009 July – December 2009 May 2010 October 2010 Late 2011 Feasibility Study Pilot testing with Dense Media Separation (“DMS”) circuit Lab flotation and pilot test-work on site Langbeinite granulation test-work Visit to site to view
Slide 26: Low-Cost, Solar Evaporation Assets
Low-Cost, Solar Evaporation Assets 27
Slide 27: HB Potash Solar Solution Mine: Incremental Capacity
28 $600 per ton Capex to reopen an existing mine compared to an estimated cost of ~$1,400 per ton for greenfield projects HB expected to be among the lower-cost potash mines in North America Same proven solar evaporation and solution mining technology as used in Moab Will share infrastructure with e
Slide 28: HB Potash Solar Solution Mine: Project Timeline
HB Potash Solar Solution Mine: Project Timeline 29 Fifteen months into the EIS process with the BLM and we continue to remain on schedule. BLM has issued its scoping summary report for the EIS and is moving forward on preparation of the draft EIS. Working with the New Mexico Environment Department o
Slide 29: Final Thoughts
30 Strong Long-Term Industry Fundamentals The Only Western World Potash Pure-Play Strategically Located Assets Diversified Markets and Customer Base Well-Defined, Attractive Organic Growth Opportunities Final Thoughts
Slide 30: Appendix
POTASH Appendix
Slide 31: Conversion Rates
32 Conversion Rates 1 metric tonne = 1.102 short tons 1 product ton of potash (KCL or KCL Equivalent) = 61% K20 1 product ton of langbeinite = 22% K20 1 product ton of SOP = 50% K20
Slide 32: Long-Life Reserves
33 Long-Life Reserves (1) Product / Operations Date Mine Opened Current Extraction Method Minimum Remaining Life (years) Current Annual Estimated Productive Capacity in Potash Product Tons Muriate of Potash Solar Moab 1965 Solution 126 130 Wendover 1932 Shallow Brine 30 100 HB Solution Mine(2) N/A S
Slide 33: Selected Financial Data
34 Selected Financial Data Adjusted Net Income (1,2) (In millions) EBITDA (1,2) (In millions, except gross margin percentage) Net Sales(2) (In millions) Earnings Per Share (2) (Diluted) This is a financial measurement not calculated based on U.S. Generally Accepted Accounting Principles (Non GAAP).
Slide 34: Selected Operating Data
35 Selected Operating Data Potash Average Net Realized Sales Price (Per short ton) Trio™ Average Net Realized Sales Price (Per short ton) $295 $425 $623 $762 $727 $674 $458 $408 $354 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 $123 $188 $283 $323 $330 $338 $246 $190 $167 Q1 08 Q2 08 Q3 08
Slide 35: Calculation of EBITDA
Calculation of EBITDA 36 Non-GAAP Reconciliation Earnings before income taxes, interest, depreciation and amortization (“EBITDA”) is computed as net income adjusted for the add back of income tax expense, interest expense including derivatives, depreciation, depletion, amortization, asset retirement
Slide 36: Calculation of Adjusted Net Income
Calculation of Adjusted Net Income 37 Non-GAAP Reconciliation Adjusted net income is calculated as net income adjusted for significant non-cash and unusual items. Examples of non-cash and unusual charges include insurance settlements in excess of property losses, non-cash gains or losses associated
Slide 37: Historical Quarterly Production and Sales Summary
38 Historical Quarterly Production and Sales Summary 2010 March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, Production volume (in thousands of short tons): Potash 224 210 200 201 137 131 112 124 172 Langbeinite 56 58 50 34 42 45 60 45 57 Sales volu
Slide 38: Carlsbad Potash Area
39 Carlsbad Potash Area
Slide 39: HB – Potash Mine Flood Area
40 HB – Potash Mine Flood Area
Slide 40: Low-Cost, Low-Sovereign Risk Expansions
41 19,033 Low-Cost, Low-Sovereign Risk Expansions Capital Cost Curve for Announced Potash Expansion Projects Capital Costs ($) / ton (1) Incremental Annual Production Capacity (2) MOS / PCS / Intrepid PCS CVRD (Argentina) MagMinerals (Congo) Greenfield Project Intrepid Greenfield (HB) Brownfield Pro
Slide 41: Depleted Conventional Mines and Supply Shocks
42 Depleted Conventional Mines Mines Currently With Less than 15 Years Reserve Life Theodore, Amelie, Marie Louis mines in France Pasquasi and San Cataldo mines in Italy Salzdetfurth, Friedrichshall, Bergmannssegen-Hugo, Siegfried-Giesen, and Niedersachen-Riedel German mines Trona, California Severa
Slide 42: Few Deposits, Fewer Global Producers
43 Few Deposits, Fewer Global Producers 2009– MM KCL Equivalent Tons (2) (3) (2) (2,5) Source: Public filings and select country data from Fertecon (1) Mosaic’s fiscal year ends on May 31. (2) PCS has ownership stake. (3) PCS markets Intrepid Potash’s products exclusively outside North America. (4)
Slide 43: Potash Production and North American Inventory Levels
44 Potash Production and North American Inventory Levels N. American Inventory (000s Tons KCL Equivalent) Source: IPNI, Fertecon, Intrepid Potash. Potash Production (000s Tons KCL Equivalent) (1) Global Production North American Production 5,000 15,000 25,000 35,000 45,000 55,000 65,000 75,000 500 1
Slide 44: Demand Growth from Brazil, India & China
45 Demand Growth from Brazil, India & China Reaching Recommended Application Levels China Brazil India Source: IPNI, Potash Corp. (MM Tons KCL) Goal to attain self-sufficiency of food supply History of under-application of potash Need to increase yields Increasing land use for agricultural purposes
Slide 45: Fertilizer Use Far Below Recommended Rates
46 Fertilizer Use Far Below Recommended Rates Source: Morgan Stanley, Agricultural Products Research, September 4, 2008. 146% Shortfall 86% Shortfall 288% Shortfall Global Application Rates (lb/acre) 60 112 24 59 17 66 0 20 40 60 80 100 120 Nitrogen Phosphate Potash Current Application Rate Scientif
Slide 46: Yield Response at Varying Soil Test Levels
47 Yield Response at Varying Soil Test Levels Average Yield Response to Potash Fertilization - No data for medium alfalfa yields. Response shown is an average of low and high yield responses. - Avg. relative yield assumes all other factors are non-limiting, yields approach 100% after fertilization,
Slide 47: Return on Potash Investment for Corn & Soybeans
Return on Potash Investment for Corn & Soybeans 48 ROI assumes 163.5 bu/acre and $3.59/bu for corn, 44.0 bu/acre yield and $8.86 for soybeans, $525/ton KCL Input Costs for Corn ($/bu) Input Costs for Corn ($/acre) Return on Potash Investment Source: USDA, IPNI, & Intrepid Potash. Corn Soybeans Input
Slide 48: Intrepid Potash Management Structure
Intrepid Potash Management Structure 49
Slide 49: Management Ownership Benchmarking
Management Ownership Benchmarking 50 (1) Market data as of 5/7/2010 Source: CapIQ Insider Ownership Benchmarking Analysis (1) $USMM Company Industry Market Capitalization ($MM) % Owned by Insiders Fertilizer Intrepid Potash, Inc. Fertilizer 1,891 40.8% Compass Minerals International Inc. Fertilizer